To provide affordable housing to those who need it most, the federal government should aim to build one million rent-geared-to-income community homes by 2030 and reboot the not-for-profit and co-operative housing sector. To align with climate-change goals and provide lasting affordability, these homes should be built near public transit and meet net-zero and climate–resilient codes and standards.

This level of ambition requires an all-hands-on-deck approach by governments and partners. Federal leadership can be the catalyst that sparks widespread action. The federal government used to play a significant role in building subsidized community housing (or public housing) and financing a once-thriving not-for-profit housing sector, including co-operatives, but no longer does so. Building more affordable housing can relieve market pressure, improving affordability for everyone.

The Affordability Action Council recommends that the federal government:

1. Acquire property near transit to build net-zero and climate-resilient community-housing infrastructure

• Expand the Federal Lands Initiative and make a front-loaded investment in property acquisition close to rapid public transit;
• Keep land in federal hands so the value of the asset reduces the budgetary impact;
• Leverage the capacity of the Canada Lands Company to co-ordinate housing developments;
• Combine low-cost leases with other federal incentives and an expanded Rapid Housing Initiative to develop innovative mixed-income housing on acquired properties;
• Leverage the investment power of the Canada Infrastructure Bank — and its mandate for green infrastructure — to ensure developments and retrofits use future-ready building and energy practices and meet net-zero and climate-resilient codes and standards.

2. Provide more attractive financing to scale the not-for-profit housing sector

• Use federal programs to reduce the financial barriers facing land trusts, co-ops, charitable housing and not-for-profit community corporations committed to providing affordable housing;
• Increase the upper limit of non-repayable contributions and guarantee a fixed low interest rate on loans for not-for-profit projects under the National Housing Co-Investment Fund;
• Allow not-for-profit housing providers to stack federal, provincial and municipal financing programs so that they can draw on multiple avenues of support;
• Provide greater financial incentives for not-for-profit projects located near rapid public transit that meet net-zero and climate-resilient codes and standards;
• Use the Housing Accelerator Fund to encourage municipalities to remove barriers, including zoning and permitting regulations, for not-for-profit housing developments near rapid transit.

Lack of Community Housing has Left Low-Income Households in Dire Straits

Canada’s population has doubled since the 1970s, yet community housing construction has dropped (box 1). Most of Canada’s public, not-for-profit and co-operative housing was built before the 1990s with assistance from the federal government (Canada Mortgage and Housing Corporation, 2021a); more than half of Canada’s community and below-market-rent housing stock was built before 1980 (Canada Mortgage and Housing Corporation, 2023a). Non-market housing represents only about 5 per cent of Canada’s existing housing stock, intensifying Canada’s affordable housing challenge (Statistics Canada, 2023a).

Over one million low-income or very low-income families live in unaffordable, overcrowded, uninhabitable or inadequate housing. They require rent below $1,050 per month to afford other basic needs such as food (figure 1a and 1b). Average rent for a vacant one-bedroom apartment in Toronto in September 2022 was $2,329; in Vancouver, it was $2,574 (Myers, 2022). And more than 230,000 people are homeless (Dionne et al., 2023). Canada has a lot of catching up to do.

The federal government dropped the ball over three decades ago when it stopped funding community housing. Federal support for the construction of community housing declined in the late 1980s and ended altogether in 1992, when responsibility was shifted to the provinces (Deng et al., 2023). Some provinces, including Ontario, subsequently downloaded responsibility to municipalities, which lack the revenue streams and budgets to build enough community housing units to meet demand (Canadian Centre for Housing Rights, 2022).

Wait-lists for community housing in major metropolitan areas are very long. In Toronto, the average wait time for a one-bedroom subsidized apartment was 14 years at the end of 2022, with over 85,000 households waiting for all types of subsidized housing (City of Toronto, n.d.). In Montreal, the average wait time for subsidized housing is six years (Vallis, 2023).

The federal government has committed to reducing poverty by 50 per cent below 2015 levels by 2030, but this goal is at risk. Temporary benefits introduced during the COVID-19 pandemic helped reduce poverty, but the rising cost of housing and other basic needs is now eroding those gains and increasing food insecurity (Food Banks Canada, n.d.).

Of the households living in poverty in 2016, 62 per cent were renters (Randle et al., 2022). In Toronto, almost one-quarter of renters spend more than 50 per cent of their income on shelter costs (City of Toronto, 2021). People earning minimum wage are no longer able to afford rent in major cities, and, with a shortage of community housing, they are increasingly competing with those on social assistance for rental spaces (Macdonald & Tranjan, 2023). This competition pushes rents even higher. Businesses dependent on low-wage workers are struggling because workers cannot take a job where they can’t afford to live (Statistics Canada, 2022).

Housing Has Important Implications for Affordability, Resilience and Emissions

Housing built today will still be standing in 2050 and perhaps beyond. In this respect, it is similar to long-lived infrastructure like roads and bridges. The type of buildings constructed and their location will affect societal, economic and environmental outcomes for decades. An estimated 5.8 million housing units are needed to restore overall housing affordability by 2030. This will require building an additional 3.5 million units beyond what is already planned (Canada Mortgage and Housing Corporation, 2022).

While there may be a temptation to build cheap housing as quickly as possible, the relationship between housing and greenhouse-gas emissions must be considered. Meeting Canada’s 2050 net-zero target will require all residential buildings to be zero emitting. In 2021, residential buildings emitted 40 million tonnes of greenhouse-gas emissions. CMHC estimates 3.5 million additional units of housing are needed to restore housing affordability by 2030, on top of the 2.3 million units already expected to be built (Canada Mortgage and Housing Corporation, 2022). If the 5.8 million new and proposed -residential and commercial buildings are constructed without changing building practices, it will be more difficult for Canada to meet its 2030 and 2050 emission-reduction targets. (Guldimann, 2023).

Every residential building that is built between now and 2050 without the net-zero target in mind will create a liability down the line that someone will have to pay for. While retrofits generate multiple benefits, it is much cheaper to build new housing that meets a net-zero standard than it is to retrofit buildings.

Housing that is not designed to withstand the effects of a changing climate, including the increased frequency and severity of heat waves, floods, wildfires, smoke and storms, will put people living in them at increased risk (Canadian Council of Academies, 2019). Households that can least afford to rebuild or replace food lost in a power outage are most in need of protection (Dugan et al., 2023). They can also face long-term health consequences from mould and poor air quality resulting from flooding or storm damage.

The location of housing is critical for both affordability and emission reduction. Housing built on land that is far from public transit and other amenities such as grocery stores, health care and schools may be cheaper, but costs for households and municipalities will be higher. People will need to travel by car, increasing their energy costs as well as air pollution and greenhouse-gas emissions. Municipalities will need to invest in new road, water, sewer and power infrastructure. Higher density does not necessarily mean building rows of large apartment towers. Mid-rise rental units with ample green space and shared heating that can accommodate families offer significant potential for improving affordability and reducing emissions.

Affordable housing strategies need to see the big picture and include near-term plans that will foster the communities we want to develop over the next 30 to 40 years. This means focusing on affordability as well as convenience, resilience and energy efficiency (box 2). Future-ready community housing infrastructure has the potential to provide a better future for everyone.

Community Housing Is at the Heart of the Challenge — and the Opportunity

While there is a need to build all types of housing, community housing with rent geared to income should be the priority. From an equity perspective, shelter is a critical basic need. Those struggling to pay rent and buy groceries should be first in line for affordable housing.

Housing for low-income Canadians can help improve rental affordability for everyone

Current spending on housing programs aimed at low-income households is a drop in the bucket. Canada’s Rapid Housing Initiative, which is part of the National Housing Strategy, has dedicated $4 billion since 2020 to create new affordable homes for those in greatest need (Canada Mortgage and Housing Corporation, 2023b), mostly in the form of supportive housing to respond to critical homelessness during the pandemic (BC Housing, n.d.; National Housing Council, 2022). However, over one million low-income households are in core housing need and over 230,000 are estimated to be homeless (Housing Assessment Resource Tools, n.d.).

Several initiatives aimed at spurring construction have recently been announced. The federal government has removed the GST on new rental construction, announced funding through the Housing Accelerator Fund and expanded access to low-cost loans for builders (Appendix A). On their own, these initiatives will increase supply and improve affordability for middle-income Canadians. In the interim, however, lower- and fixed-income Canadians will continue to compete with moderate- and middle-income households for limited rental supply (Canada Mortgage and Housing Corporation, 2023d).

A focus on building more community housing will directly target Canadians in greatest need and relieve competition in the broader rental market. Scotiabank has argued for accelerating the building of community housing, noting that shortages in one housing market segment will have spillover effects in others (Young, 2023). There is an urgent need to scale up the construction of homes for households at the bottom of the income ladder.

Governments and not-for-profits are best placed to provide affordable housing

Housing cannot be built fast enough through private initiatives to bring down market rents to the level needed by low-income households. The only near-term solution is to build more publicly subsidized community housing with rent geared to income and housing with below–market rents operated by non-profit organizations.

Not-for-profit developers — such as land trusts, co-ops, charitable housing and not-for-profit community corporations — have demonstrated the ability to deliver affordability (Lee, 2021). They can reduce project costs by 20 per cent to 25 per cent. If the project is built on public land, it can lead to savings of 15 per cent to 30 per cent (Whitzman & Goldstein, 2023).

Community housing infrastructure offers the opportunity for federal
innovation and leadership

Community housing can be an opportunity to establish the future-ready housing infrastructure Canada needs to achieve lasting affordability, net-zero emissions and resilience to a changing climate. There are opportunities for these communities to pay off financially while also meeting public policy objectives:

• Mixed-income community-housing developments are feasible with cross-subsidization

With a desirable location near rapid transit, a mixed-income housing development that includes subsidized housing along with moderate- and middle-income rentals would be possible (Lee, 2021). Revenues from moderate- and middle-income housing could help cover the cost of subsidized housing for very low- and low-income households.

• Net-zero housing at scale can lower building construction and operational costs

Better energy efficiency means lower bills. But construction costs can also be reduced with proper design and planning. Some components, such as insulation, may require more upfront investment, but will save costs because they require smaller heating systems. Electrification also reduces the need for extra fossil fuel exhaust and distribution systems (Haley & Lockhart, 2023; ZEBx, 2021). Simpler designs, integrated project teams and pre-manufactured building components can further reduce expenses.

• Housing communities could be virtual power plants

Utilities could use household technologies such as smart thermostats, battery generators, solar panels, district heating and two-way vehicle charging to reduce electricity demand and to provide extra power during heat waves or cold snaps. This would avoid the need to construct new larger power plants. This has the potential to result in lower overall power costs, increased resilience to storms and natural disasters, and higher revenue for households and landlords (U.S. Department of Energy, n.d.). California is already offering incentives to vulnerable customers to install battery generators (California Public Utilities Commission, n.d.).

The Federal Government Should Lead the Way

The federal government should renew its commitment to playing a leading role in building affordable housing. It could be a nation-building infrastructure exercise aimed at achieving critical public policy goals such as poverty reduction, net-zero emissions and resilience to a changing climate.

The effort could start with an ambitious goal to build one million community housing units by 2030. Canada has among the lowest levels of non-profit community housing in the developed world, accounting for only 5 per cent of its total housing stock, compared to 40 per cent in Sweden, 16 per cent in the U.K. and 14 per cent in France. Building one million units would double the community housing stock and bring Canada closer to 10 per cent (Saravanamuttoo & McKenney, 2023).

Constructing community housing on federal lands and scaling the not-for-profit housing sector will expand the supply of housing at below-market rents.

The Affordability Action Council recommends a two-pronged federal strategy:

Recommendation #1: Acquire property near transit to build net-zero and resilient community-housing infrastructure

The federal government should expand the Federal Lands Initiative with a front-loaded major investment in property acquisition of land close to rapid public transit. The Federal Lands Initiative supports the transfer and repurposing of surplus federal properties for new, affordable, sustainable, accessible and socially inclusive housing. Adding a property-acquisition element would help to scale the popular program. Property acquisition has been recommended by the proposed National Housing Accord, which has been developed by non-profit and private–sector organizations (Richter et al., 2023), and other experts. Properties could be those well-suited to new or rehabilitated and retrofitted community housing.

However, instead of transferring properties, the federal government should retain ownership to keep the value of the asset on its books and limit the budgetary impact (Meredith & Broadbent, 2023). The land could be leased at low cost to partner organizations, community land trusts or other levels of government as long as housing affordability is maintained. The Canada Lands Company, a Crown corporation, has already demonstrated the capacity to co-ordinate the development of innovative housing projects on federal properties. Its mandate and funding could be expanded.

The map of Toronto shown in figure 2 highlights some of the opportunities the federal government could explore. Properties close to existing or planned rapid-transit stations with low population density and a high share of old dwellings may be some of the most promising locations for new or retrofitted affordable housing. The Housing Assessment Resource Tools (HART) developed by the University of British Columbia could be used to evaluate the suitability of properties for housing development (Housing Assessment Resource Tools, n.d.).

The Rapid Housing Initiative, which provides capital contributions for the construction of new housing and the acquisition of existing buildings for rehabilitation or conversion to permanent affordable housing, should be expanded with significant additional funding to achieve the pace and scale of the effort needed.

The Canada Infrastructure Bank (CIB) also offers the potential to scale the initiative and ensure housing developments and retrofits use leading building practices consistent with Canada’s climate goals (Kershaw, 2021). The CIB is already involved in major retrofit projects with non-profit housing providers and is committed to investing up to $5 billion in green infrastructure (Canada Infrastructure Bank, 2022). With a public purpose mandate to support green infrastructure, clean power and public transit infrastructure, there could be an opportunity to explore innovative, net-zero, mixed-income housing developments that could serve as a launch point for livable communities. These developments could generate and store power and be integrated with CIB public-transit investments.

Recommendation #2: Provide more attractive financing to scale the
not-for-profit housing sector

The federal government can also help Canada’s not-for-profit housing sector overcome financial barriers to building affordable housing projects.

For example, the National Housing Co-Investment Fund provides low-cost repayable loans, forgivable loans and non-repayable contributions to a Canadian entity developing affordable housing near transit, schools and other amenities (Appendix A). However, it caps funding at $25,000 per unit for units that meet minimum social-outcome requirements, and $75,000 for units that exceed affordability and energy-efficiency standards. In addition, the interest rates on the loans fluctuate with CMHC borrowing costs. These features make it difficult for non-profit organizations to break even (box 3).

The program also has limited requirements for energy efficiency and resilience, requiring only a 25 per cent decrease in energy consumption and GHG emissions from 2015 National Energy Code levels, despite existing newer and more stringent building codes. The 2020 model national building code, for example, has tiers progressing toward a net-zero energy-ready standard and a net-zero emissions code in development.

The federal government can do better. CMHC could increase per-project contribution financing and provide fixed low interest rates for the most affordable, net-zero, resilient buildings located near public transit. CMHC could also allow greater stacking of its programs so that developers can draw on multiple avenues of support (Canada Mortgage and Housing Corporation, 2021b; Federation of Canadian Municipalities, 2017; Whitzman & Goldstein, 2023). Developers should be expected to meet the latest energy-ready and net-zero emission standards and codes but receive additional funding for doing so. The Canadian Housing and Renewal Association has called for more generous project funding, noting that interest rates and inflation have eroded the value of the incentive (Sullivan, 2022).

The federal Housing Accelerator Fund, which provides financial support to local governments, could be used to encourage municipal governments to ease restrictive zoning and permitting regulations, and the building of more affordable, high-density housing with leading net-zero and resilient building practices (Appendix A). Greater use of federal sticks and carrots can help unlock housing investment where it is needed (Canada Lands Company, n.d.). For example, the federal government could set quotas for the quantity of affordable housing and increase requirements for new developments to meet net-zero and climate–resilient building codes and standards.

The federal government will not be able to achieve the goal of building one million community homes without an all-hands-on-deck collaboration involving multiple levels of government, non-profit organizations and the private sector. Municipalities must ease zoning and permitting regulations, non-profit organizations will need to scale, workers and building materials must be found, companies should innovate building practices and provincial utilities will need to develop programs that value distributed energy resources. However, the Affordability Action Council’s two-pronged strategy provides a solid foundation on which to build.

Connections to Other Affordability Priorities

The Affordability Action Council has prioritized housing, transportation and food as key areas in which the federal government can take action to help low-income households meet their basic needs in ways that also support emission reduction and resilience to a changing climate.

All areas of affordability are interconnected, with actions in one area benefiting another. Building energy-efficient and climate-resilient community housing will help to avoid costly retrofits in the future, and building housing near public transit will help to reduce transportation costs and emissions. Reducing housing costs will also improve food security by freeing up money for groceries.

Restoring federal leadership in community housing offers the potential to restore affordability and fight poverty, and do so in a way that helps Canada meet its climate goals.